Investors should keep an eye on Energy-storage companies. Despite declines in storage-system costs, the future could look different than previously expected by analysts. Yet, it is not all negative and some might view the outlook as encouraging. Currently there are some commercial uses for energy storage with economic benefits. In the future utilities, industrial customers, and households might benefit from energy storage. This is due to lower system costs, and also the decreasing incentives of government on solar power. These factors can lead to increasing financial sensibility to store power over exporting it to the grid.
The economics aren’t new to investors savvy with renewable energy; as costs of an average system decrease, room storage developers will have less room to undercut competitors. This has resulted in the past in squeezing every penny of savings to processes like customer acquisition, engineering, permitting, system integration, and installation. This process occurred already in the solar photovoltaic (PV) business between 2005 and 2015. The result was a 75 percent lower cost of PV modules and forced solar developers to pivot on operational efficiency. Unfortunately for most, this triggered a major restructuring among module manufacturers (including multiple bankruptcies) and eliminated a large portion of profit margins.
Therefore, as investors look forward they should expect only a small set of energy-storage companies to be successful. Their profitability is derived from taking share away from less cost-effective rivals.
Keith Knutsson of Integrale Advisors commented, “As investors look into the past, trends of the future are not always as surprising as they seem. Looking at previous business cycles of developing technologies can help against costly mistakes.”